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The Apprenticeship levy is payable by all employers with an annual payroll bill in excess of £3million. This essentially will work like a tax set at a rate of 0.5% and will be automatically collected by HMRC via the PAYE system on a monthly basis.
The government will top up the amount deducted with a 10% contribution each month. There’s also a £15000 allowance before levy deductions are made.
Let’s illustrate the financials behind the levy with an example:
If a company has 500 employees on an average salary of £20,000 how much do pay for the Levy and how much funding do you end up with each month?
Annual Payroll = 500x20000 = £10,000,000 per annum
Levy = 0.5% x 10000000 = £50,000 per annum
After Allowance = 50000-15000 = £35,000 total per annum deducted via the Levy
Monthly Contribution = 35000 ÷ 12 = £2,917 payable per month
Final Amount = 2917 + 10% = £3,208.70 total monthly amount paid into DAS (Digital Apprenticeship Service)
The funds are paid into DAS which is an online account for employers to access their apprenticeship funding from the levy.
As funds are taken monthly and to enable employers to start training apprentices right away, employers can also spread the cost on a monthly basis across the lifetime of the apprenticeship.
To clarify this means training can begin even if there is not enough money to cover the entire cost of the apprenticeship in your DAS account, as soon as you can pay the first instalment the apprenticeship can begin.
A point of note here is that it is up to employers to negotiate with providers on the total cost and structure of the apprenticeship (within the new funding bands).
If you’d like more detailed information you can view our Apprenticeship Levy Guide
Alternatively, if you'd like someone to contact you with regard to the levy, what it will mean to your business and how we can support you - then contact us email@example.com / 0113 386 1997
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